Pulse: E-Commerce Weakness Short-Circuits Nasdaq, Tech Plays
Ask for a trigger for today's losses and you would get a couple of answers -- concern about earnings and concern that all of the good news has been priced into the market. And that's about as good as anything got out there. The
Nasdaq
dropped steadily throughout the day after a move to the upside failed and sellers seized control.
The Nasdaq finished down 112.88, or 2.8%, at 3981.57, near the session low of 3976.51.
TheStreet.com Internet Sector
index dropped 45.03, or 5.4%, to 783.69.
There were some notable losses, including
priceline.com
(PCLN)
, which ended down 8 15/16, or 22.3%, to 31 1/8, despite besting quarterly estimates. There may have been some disappointment that priceline did not blow away estimates; and the stock had risen more than 20% since July 11, so there likely was some profit-taking. priceline also suffered a fate similar to a couple of
stocks on Friday, which saw postearnings selling that snowballed in part due to investor uncertainty over whether there was something wrong that they may not have understood.
The name-your-own-price for airline tickets and more company reported a loss of 1 cent a share for its second quarter vs. Street estimates of a 3-cent decline.
TSC's
Katherine Hobson
took a closer look at the
numbers earlier.
TheStreet Recommends
Other e-commerce companies that have yet to report quarterly numbers also slipped in sympathy.
eBay
, which was scheduled to report after the close, ended down 3 5/8, or 6%, at 55 1/8.
Amazon.com
(AMZN) - Get Amazon.com, Inc. Report
, which is scheduled to report on Wednesday, finished down 2 3/8, or 6%, at 38 3/4.
eToys
(ETYS)
, which is scheduled to report on Thursday, closed down 11/32, or 6%, at 5 3/16.
Among other notable declines,
Inktomi
(INKT)
ended down 10 3/4, or 8%, at 119. Losses most likely came on profit-taking after the company reported earnings last week.
Akamai
(AKAM) - Get Akamai Technologies, Inc. Report
dropped 9 1/8, or 7.8%, to 107 7/8.
Business-to-business plays were mixed. The sector has had a tough time living up to the lofty expectations that were set by
Ariba
(ARBA)
when it reported its numbers two weeks ago. Ahead of its earnings report after the close, shares of
FreeMarkets
(FMKT)
closed up 1 1/4, or 2.4%, at 53 1/2. And while FreeMarkets posted posted
strong numbers, it was lower in after-market trading. The sector could key on how it does tomorrow.
Among other B2B plays,
VerticalNet
(VERT)
closed up 1 3/8, or 2.5%, at 56 3/4. It reports on Wednesday. And
WebMethods
(WEBM)
, one of the most-volatile stocks in the sector due to a small float, closed down 18 7/16, or 11.7%, at 138 15/16.
i2 Technologies
(ITWO)
closed down 10 1/8, or 7%, at 134, while
E.piphany
(EPNY)
ended down 11, or 9%, at 106.
2:11 P.M.: B2B Stocks Riding Rocky Road in Tech Sector Today
Uncertainty about earnings, as well investor reaction to these reports, is making for a down market today.
In recent trading, the
Nasdaq Composite Index was down 83.6 to 4010.8.
TheStreet.com Internet Sector
index was off 39.18 to 789.47. Our friends the technical analysts also have noticed the uncertainty in the market.
Robert Dickey, director of technical research with
Dain Rauscher Wessels
remains positive on the tech sector, indicating that the trend over the next several weeks is up "if you can filter out the noise and whippy action in between." He has a 4600 price target on the Nasdaq.
"This earnings reporting season is turning out to be a difficult one for stocks," Dickey writes. "Good news is often met with profit taking, and there also seems to be an unusually high amount of late disappointments that are causing those stocks to get crushed. A few however, are reacting positively to their good numbers but in those cases the reported numbers are generally well ahead of expectations. The choppy action will continue this week with the same upward bias, but lacking in momentum and participation."
Taking a more cautious approach is John Roque, vice president of
Arnhold and S. Bleichroeder
. Roque says he is concerned about the inability of stocks to work their way higher on what has generally been better-than-expected earnings news and a relatively benign speech by
Federal Reserve Chairman
Alan Greenspan last week.
"Sure stocks jumped sharply on the day of his testimony, but the action on Friday clearly left us wanting more," Roque writes. "Perhaps the market, in its inimitable way, is providing a minor 'warning sign' that there will be a corrective phase sooner rather than later. It seems to us that everyone and their mother has already discounted a fall correction. Perhaps the inability of stocks to respond positively to better than expected earnings and the Fed Chairman¿s testimony says the likelihood of a late July/early August correction is growing."
The business-to-business area remains among the most volatile in the tech sector today and was contributing to the weakness in the Nasdaq. A couple of stocks were moving in advance of their earnings reports.
Shares of
FreeMarkets
(FMKT)
were down 1% ahead of its earnings report that will be released after the close today. Our own Joe "B2B" Bousquin goes
"Behind the Music" in a
preview of FreeMarket's report.
Also on the docket for Wednesday are
VerticalNet
(VERT)
,
Clarus
(CLRS)
and
WebMethods
(WEBM)
. VerticalNet was up 2.4%, Clarus was gaining 0.75% and WebMethods was losing 11.7%.
AskJeeves
(ASKJ)
, which is scheduled to report tomorrow, was down 1.5%.
Also among B2B plays,
i2 Technologies
(ITWO)
was off 6.4%;
Broadvision
(BVSN) - Get BroadVision Inc. Report
was down 6.5%; and
Foundry Networks
undefined
was losing 7.8%.
priceline.com
(PCLN)
continued to be among the day's big decliners among traditional Internet plays. It was off 16.5% after reporting earnings this morning. The stock had run up in advance of its report and today's poor market conditions were not helping.
10:40 a.m.: Nasdaq Gains After Rocky Start but priceline.com Hurts DOT
Earnings season in the high-tech sector has been everything but predictable. There has been buying on expectations of good earnings, then selling after, and selling into some reports and buying after. The price action has left investors confused, and left the market somewhat mixed early today.
The
Nasdaq was up 27, or 0.7%, to 4122 in recent trading.
TheStreet.com Internet Sector
index was down 7, or 0.9%, to 821 on its first day of trading with 24 components instead of 20.
TSC
last week ran a
story previewing the change, and our
FAQ on the DOT offers more background information.
We have an earnings report right out of the block. New DOT member
priceline.com
(PCLN)
was down 7.3% after posting a 1-cent loss for its second quarter vs. the 3-cent loss estimate from
First Call/Thomson Financial
. Revenues of $352.1 million bested the $335 million estimate from
Wit SoundView
, though we also saw an old note from
Merrill Lynch
that had a $350 revenue estimate for the quarter. Losses most likely reflected profit-taking after a pre-earnings run-up as the stock had rallied more than 20% since July 11.
Ryan Alexander, vice president in equity research with Wit SoundView, said priceline's results were "very solid." He said the company continues to be able to reduce its operating loss, which came in at $4.4 million and its acquisition costs of $11 per customer was compelling compared to other e-commerce companies. He said its addition of 1.5 million customers in the second quarter was in line with his expectations. Alexander said his model has priceline turning a profit by the end of the year, though it could as soon as the third quarter. Wit SoundView has done underwriting for priceline.
Greg Konenzy, analyst with
U.S. Bancorp Piper Jaffray
, also was impressed by the numbers and sees priceline as a long-term winner among e-commerce players. U.S. Bancorp Piper Jaffray has not done underwriting for priceline.
"We think the real story that is going to come out is growth out of travel," said Konenzy. "The key to the story is the mortgage product, automotive, telecommunications, international developments and other vertical segments they will be introducing in the next year."
As for the stock, Konenzy admits it may take some time. "I think priceline is one that is going to be a good investment and the fundamentals are going to reflect that this is going to be a large and profitable business," he said. "As investors start to become aware of that, the stock will react more positively."
Elsewhere, shares of
Oracle
(ORCL) - Get Oracle Corporation Report
were up 3.4%. The software company said it had been selected as a technology partner for
Aeroxchange
, the airline industry's business-to-business e-commerce exchange for aircraft parts and supplies.
Nortel Networks
(NT)
was up 2.8%. Nortel is reportedly is in talks to sell its optical-parts unit to
Corning
(GLW) - Get Corning Inc Report
, which was down 3.7%, in a deal that could be worth more than $100 billion, according to
The Wall Street Journal
. The article says the deal could be complicated, so talks could break down without reaching an agreement.
Perhaps speaking more for the market for dot-com stocks than for the market in general,
NetFlix.com
, an online source for movie recommendations and DVD rentals, withdrew its planned $86 million IPO because of market conditions.
Finally, check out
Gary B. Smith's
column that ran earlier today on how stops can be your friend. Any column that includes a reference to
Linda Blair
is worth a read.
